The Middle East has been a hotbed of strife for longer than mankind has been writing things down. One global power after another got bogged down in the sands of the endless deserts, every single one thinking they had a strategic reason to be there. Invaders have come for oil, land, trade routes as well as for reasons either ostensibly or actually motivated by religious belief. At various times it was the Romans, the Crusaders, the British, the Russians and, lately, the U.S. Yet the Middle East today is just as steeped in blood and conflict as it’s ever been and now we’re trying to support democracy in a region that doesn’t value the institution or appreciate the effort.
With Iraq a broken state, there are now only two real power centers in the region: One centered around Saudi Arabia and the other Iran. The division between the two is part religious, with Saudi Arabia supporting Sunni Muslims and Iran backing Shiites, and part sectarian. The philosophical gulf dividing the two nations is wider than the Persian Gulf that lies between them and has triggered a proxy war that’s fast spinning out of control.
Lifting the Sanctions
For a long time Iran has been handicapped by international sanctions but with these soon coming to an end Iranians will once again be able to sell oil on world markets. European companies are lining up to develop business relationships there. U.S. companies, which will still be prohibited from doing business with Iran, will be left out of that new market. Part of the reason Saudi Arabia has not cut oil production in order to raise prices is to keep oil prices low for Iran, a move that’s also strangling domestic oil production in the United States. So far, U.S. oil producers are not backing down but it’s significant that Saudi Arabia is willing to hurt a long-term ally in an effort to hurt Iran.
Throwing Gasoline on the Fire
Apparently feeling things weren’t tense enough, Saudi Arabia decide, in the midst of this smoldering proxy war, to execute a highly revered Shia Cleric, Nimr al-Nimr, on terrorism charges on January 2. The Shia response, led by Iran, was swift and shrill and neither side has a margin in backing down. The two countries have severed diplomatic ties, further complicating efforts to defuse an already volatile situation.
Spiraling Out of Control?
One could argue it’s already out of hand, with the Saudis launching air strikes at Iranian advisors and allies in Yemen. It’s not so much that things could get out of hand but that they already are and could get much, much worse. Saudi Arabia has the more technically advanced army, with billions in high-tech equipment from the United States. Iran has a bigger army and more sea power, a big advantage when facing your opponent across a narrow body of water. Saudi Arabia also depends upon the Persian Gulf, the Strait of Hormuz and the Gulf of Oman to move its oil. Now guess who Saudi Arabia depends upon for sea power? If you guessed the United States, give yourself a prize.
Ideally the smart thing for the U.S. to do would be to stay out of any conflict between Saudi Arabia and Iran but we’re already being dragged in as Iran fired a missile within 1,500 yards of a U.S. aircraft carrier. Iran claimed they were merely conducting a live fire exercise and the U.S. ships got in the way. It’s a clear demonstration of both the level of tension and how easily that tension could escalate. And just today Iran detained ten U.S. sailors who allegedly strayed into Iranian waters. It doesn’t seem like we could extricate ourselves even if we had the will to try.
If conflict between the Saudis and Iran breaks out into open warfare, we also have to consider the effect it will have on the already shaky global economy. Corrections will turn into recessions and recessions to depressions. More likely than not the U.S. Navy would be dragged in to keep the shipping lanes open; another endless commitment of our collective treasure and American lives to yet another chapter in the millennia-old Middle East conflict.
Will Granderson is a regular columnist for Goldco Precious Metals writing on finance, precious metals, and gold as an investment and in popular culture.